Maximize Your Homebuying Power: The Benefits of Using Equity for a Bigger Down Payment

The Benefits of Using Your Equity for a Bigger Down Payment

Did you know that many homeowners are able to make larger down payments when buying their next home? This is largely thanks to the equity they’ve built up in their current property. As home prices have risen significantly in recent years, so has homeowners’ equity—giving you an opportunity to put more money down on your next house.

In fact, according to the latest data from Redfin, the typical down payment for U.S. homebuyers is now $67,500—an increase of nearly 15% from last year and the highest on record. But why does that matter? It means that homeowners like you can use the equity from selling your home to make a bigger down payment on your next one, making the buying process more affordable in the long run.

Why Using Equity for a Bigger Down Payment is a Game Changer

Here’s why so many homeowners are taking advantage of their equity when moving to a new home, and how you can benefit too.

1. You’ll Borrow Less and Save More in the Long Run

By using your equity for a larger down payment, you won’t need to borrow as much. And the less you borrow, the less you’ll end up paying in interest over the life of your mortgage. This translates into significant savings over the years, keeping more money in your pocket.

2. You Could Get a Lower Mortgage Rate

A bigger down payment shows lenders that you’re financially stable and less of a credit risk. That can make your lender more confident, which often results in a lower mortgage rate. A lower rate means even more savings on your monthly payments and throughout the life of your loan.

3. Your Monthly Payments Could Be Lower

Borrowing less also means that your monthly mortgage payments will likely be lower. This makes your new home more affordable on a monthly basis, giving you more breathing room in your budget for other expenses or even future investments.

4. You Can Avoid Private Mortgage Insurance (PMI)

If you can put down at least 20%, you can avoid Private Mortgage Insurance (PMI)—a fee typically required for homebuyers who put down less. PMI is an additional cost that gets rolled into your monthly mortgage payment, and it’s designed to protect the lender in case you can’t make your payments. By making a larger down payment and skipping PMI, you’ll have one less expense to worry about each month.

Bottom Line

Homeowners today are benefiting from their equity gains by using that extra value to make larger down payments. If you’re thinking about selling your current home and moving into a new one, let’s work together to figure out how much equity you’ve built and how it can increase your buying power in today’s market.